January 21, 2009

S.C. House Economic Development and Natural Resources Subcommittee — January 21, 2009

John Kelly, VP, Public Service and Agriculture

Thank you Mr. Chairman. I wanted to share with you some of the excitement of what is going on at Clemson in PSA and also to look at some of the impacts of the budget cuts.

The mission of PSA is to develop and deliver research and education programs that support economic development for the agriculture and forestry industry in South Carolina. We also have both state and federal mandates to protect animal and plant health, as well as the public. I think you have probably heard about the recent survey that showed that ag and forestry represent a $34 billion industry in the state.

Clemson PSA is at the core of the land-grant university system. There are 50 major land-grants in the U.S. – one in every state. They were established with the idea of driving economic development by helping people in rural areas to have access to research and education opportunities.

Some of our programs are federally-driven and others are state-driven. The federal mandate requires that we participate in the national land-grant system and develop an annual plan of work that that is reviewed by USDA to encourage collaboration with other states and to avoid duplication. Our plan includes five interrelated areas: agribusiness productivity and profitability, economic and community development, environmental conservation, food safety and nutrition, and youth development. In the last five years, we’ve only asked the state of South Carolina to fund programs that dealt with agriculture and forestry economic development and environmental conservation. We have not asked for any funding for the community and economic development initiative, the food safety and nutrition initiative, or the youth initiative. Instead we have tried to fund those from alternative sources.

There are four components that make up PSA. The Experiment Station conducts research and drives knowledge-creation for the ag and forestry sectors. Some of that work is done on our campus; some – Mr. Battle, Mr. Pitts and Mr. Lucas, you’re quite aware – is done in the Pee Dee area at the Pee Dee Research and Education Center. Some is done at Baruch, which deals with forestry and environmental research; some is done at Edisto; and some at the Coastal station in Charleston. So, the experiment stations are located in each sector of the state and each has a distinct programmatic mission so there is no duplication.

The Extension Service gives our university the pulse of what is going on in South Carolina – a realistic pulse. We go to church with South Carolina, we eat dinner with South Carolina, and we go to school with South Carolina. I think it helps us set a very realistic tone, and gives us an adaptive ability that is unique to Clemson, to address the education needs of the people in South Carolina.

We also have two regulatory units. One is Livestock and Poultry Health, which has diagnostic capabilities to deal with any terrorist type of attack on the food system. They also have regulatory responsibilities for meat inspection and animal health. They are staffed primarily with veterinarians, some with PhDs in addition to veterinary specialties in pathology and other areas. The other is Regulatory Services that protects the food supply by ensuring the proper use of pesticides, and by making sure that fertilizer and other chemicals used in agriculture are true to the label. They have a variety of testing capabilities to analyze any kind of spill.

Both regulatory units have the capacity to fine in the event of a violation. Philosophically, though, it’s important that these units be affiliated with Clemson because they treat their responsibility as “regulation through education.” We’re there to educate people in the proper way to do things so that we don’t have to issue fines.

That defines the areas of our agency, and at the end I’ll give you a few examples of some of the impacts that our programs have. I would like to talk for a minute about what has happened as a result of the current $11 million reduction in state funding for PSA. President Barker has charged 11 task forces on campus to look long-term at how the university would perform in a climate of greatly reduced state funding, and this has certainly affected PSA.

The Legislature in its wisdom has provided some very specific, targeted funding for programs that we felt would drive economic development in South Carolina. Many of those programs will now have to be on hold until we address the current budget situation. We have placed a freeze on hiring at the university and that has left 71 PSA positions unfilled. Forty-one of those positions were specific to new economic development initiatives to drive competitiveness in ag and forestry.

We have implemented a five-day furlough for the university that equates to a salary reduction of 3.8% for all our employees. We have cut the travel funds that are so essential for statewide programs. It’s hard to be a county agent and stay in an office; a county agent needs to be out where the action is. Because of the way we’ve organized our Extension Service, many agents now work multiple counties but we have reduced travel funds by 50% to all of the entities within PSA.

We had plans to renovate our animal research farms. Instead, we will have to significantly downsize the research farms, and we will have facilities that are more than 30 years old that we’ll have to live with for a while longer. We have eliminated plans to build a new turf grass research facility to support one of the largest industries in South Carolina. Those plans have been shelved, even though we were starting the architectural and engineering work.

We also have recalled funding for important programs like agromedicine, bioengineering, energy studies, and the boll weevil eradication program. If there are further cuts at the eight-percent level proposed for 2009-2010, we’ll lose about 20 people through retirement incentives that we will put into place and we’ll eliminate positions that are held by returning retirees.

We’re finding, too, that challenges that are not limited to just state budgets. Our endowments are severely impacted by the current state and national economic conditions, the banking industry and the stock market. Critical foundation accounts that we typically have to draw on are not currently available to us in PSA. We’ve also seen a drop, and a threat of an increased drop, in our federal funding. And, as you would imagine, the generated revenue funds just aren’t available right now. So, for us, that means a heavy loss of personnel.

It’s important to note that PSA is extremely collaborative with other state agencies. We work well with DNR, the S.C. Department of Agriculture, and DHEC. We differentiate responsibilities and are very collaborative in the types of things we do, whether it’s working with water resources around the state or working with the inspection system to ensure food safety throughout the state.

And let me say before we move ahead, we have a very aggressive list of capital projects and other budget requests that we had hoped to implement for even further economic development in the agriculture and forestry industry. But we won’t present those to you this year because we understand the current budget climate does not allow for increases in funding.

Instead, though, we would ask that you consider sustaining our budget at its current level – 21 percent below last year at $41.5 million. And we ask that, if there are further cuts, that you not disproportionately cut PSA, so that we can continue to serve people across the state. It’s clear that these cuts will deeply impact the agriculture and forestry sector. As President Barker said, we will do everything we can to protect our core, our essence. But as we cut away programs that we feel are important to that core, they will be felt in every county across the state.

I’d like to close with some positive news, and then answer any questions that you may have. There are some exceptionally encouraging programs on the horizon. We’ve begun a multi-state project, which goes up and down the entire east coast, to study forage-fed beef. We have scientists on our campus who have developed a forage system that turns beef into a health-promoting food, and therefore a very high-value product. Anything that promotes health right now certainly commands a much higher marketplace value for the consumer. So, now we can implement a certain type of forage system and the beef will double in the amount of the anti-cancer compound called CLA (conjugated linoleic acid). We believe the same thing will work with dairy products, and we’re starting that work now on dairy cattle.

When it comes to renewable energy, we are taking the lead for the state of South Carolina for research and development of alternative fuels. We started research a couple of years ago to look for replacements for corn-based ethanol. We believe that there are alternatives to corn, using biomass from agriculture and forestry, particularly switchgrass. The I-95 corridor is a perfect area to produce switchgrass and transport it down the Interstate to refineries to produce biofuels and then distribute them out through the port in Charleston. We believe the forest industry’s by-products could be another alternative fuel source.

President Obama has proposed a large federal money investment in alternative energy research and development. It will be extremely competitive among the states, because it will change the economy. The problem is, we have to be competitive for those dollars. We cannot go to the federal government and say, “We’d like to add these 17 people so that we can do this work.” We have to have the people already in place to compete for federal funds. It would be a tragedy if South Carolina got left out of this opportunity because this state should be, and could be, a major producer of alternative fuels. Not a week goes by that we don’t have discussions with alternative fuel entities that would like to partner with our university. Once the biofuels opportunity is exercised, every component will be available for the state revenue system… from production to refinement to distribution, and perhaps export. It would be a shame if the state missed out on this revenue source, particularly considering what the climate is going to be over the next four years for investments in this area.

The last area of interest is more a natural resource interest, but it certainly has a direct impact on economic development and also has an impact on the ag and forestry sector in our state. Everybody remembers last year’s water wars, with Atlanta thinking that they own the Savannah River and Charlotte thinking they own the Catawba. Do we go the lawsuit route, which we have done with the Catawba, or do we have a negotiated way of looking at things differently? I will give you an example, and it’s a daunting example. Because of prior negotiations, the state of Georgia owns 96% of the disposal rights into the Savannah River. And if you don’t have disposal rights, you’re not going to have economic development. So, we have 4% of those disposal rights. The Savannah River is going to be reallocated. They recognize even now that the current model is broken. Obviously, the reallocation would encourage movement toward Atlanta, where you have a massive population. So, unless, South Carolina engages in a science-based look at that river, it is likely that our allocation for disposal rights would actually diminish, even though they’re negligible to begin with.

This summer, the EPA established Clemson University to lead the watershed center of excellence for the state of South Carolina, so we will be in charge of the science that is developed on the Savannah River and in watersheds across the state. We believe that there is a large capacity that has not been accessed in the Savannah River because the allocation models are based on outdated information. So something that happened five years ago is causing a decision to be made today. We believe we can create a smart river using a remote sensing system that provides real-time data. This system can tell you: This is exactly the right time to do a disposal; this is exactly the right time to do a withdrawal; or there was a pollution event at mile marker 37 so we could stop it before it became a fish kill.

These are the things we are working on with the EPA. We’re also communicating with scientists in Georgia because it would be important that both science communities address this problem aggressively. We are not the ones who decide how the allocation occurs, but we create an opportunity for policy makers to revisit the allocation equation. That would be a huge benefit for South Carolina. This is a partnership with DHEC, DNR, and the state and federal government, with Clemson as the science component. And we’re very excited about what this partnership might mean in terms of our state’s long-term success in economic development.

So, those are a few examples of some things that we don’t want to give up. Thank you and I will be happy to answer any questions that you have about PSA.